Interview with Angelo Bonati of Panerai [12/2/02]

Ifthe Panerai watch represents a military secret, then the commanding secret behind thecompany is its President, Angelo Bonati. Signor Bonati has created what may beone of the great success stories in the watch industry over the pastquarter-century.With the supportof Richemont and a talented staff, he has engineered the development of a smallbrand into an international cult object. Panerai’s business success, and thestrategic thinking underlying that success, represents a unique story and oneseldom disclosed to the public.

AB: Angelo Bonati, President, Officine Panerai

MF: Michael Friedberg, TimeZone.com

MF:Mr. Bonati, you’re in charge of a brand that elicits strong opinions from thepublic. You must be a watch connoisseur yourself. Please tell our readers aboutyour background in the watch industry.

AB:I was always involved with the Italian market. I started with Richemont back in1980; that has been a long time. Mr. Franco Cologni was always my boss. It wasalways Richemont: at one time Cartier and then Vendome. I was President of Cartier and some other brands.

Idid leave the group for two years inmid-1990s,finding other international experience. I re-entered in 1997. Shortlythereafter, Mr. Cologni called me and said “I have an adventure in my hand. Doyou want to do it with me?”

MF:I understand that the adventure was Panerai. How did the idea of Panerai asan international brand develop?

AB:OfficinePanerai had to face the reduction of the military budget in the early 1990s, asthe Italian Navy then was its sole and exclusive client. In 1993, itcommissioned about 1000 watches from suppliers and sold them.

In 1994, Sylvester Stallone was working on a movie and wanted to see a different instrument – one that was linked to the military. He wanted it for – how do you say it? – for his “persona”.

He saw this watch and immediately said “this watch is a star”. He used it in a movie. As gifts to friends, he also commissioned a few hundred watches with the name Sly-Tech.

MF: I guess Richemont saw a brand starting to take off. Was the idea back then to buy the brand and produce more watches, in order to enhance financial returns?

AB:No, no. It was really just a decision ofthe Group, which wanted to buy a Brand with a real history and a high qualityproduct.Arial”>

MF:Surely there was more strategy underlying that decision?

AB:Yes, because at the time, Vendome didn’t have a real sports watch. Baume &Mercier, Piaget, Cartier –these really were not sports watch lines.The idea was that we needed a real sports watch brand.

MF:And how was that strategy to be implemented?

AB:We thought that there were two ways we might do it.First, we could do it in quantities, by producing the watch at a lowprice. That would use the brand strictly to generate cash. We decided notto do that.

Instead,we decided we could play another card and come from history. We decided to dothat instead.

Thewatch was a military secret. There were slightly less than 300 made before the1990s. Why, then, was the watch famous with collectors?It was because of its unique history and its quality. Historically, ithad a Rolex movement. We decided, then, to enter the market based on theexclusivity of Panerai’s history.

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MF:But historically these watches were very large. History is well and good, butwouldn’t that inhibit sales?

AB:Size was another aspect of the strangehistory. At the time of 1997, there really were only two well-known oversizedwatches, the Audemars-Piguet Royal Oak Offshore and the IWC Portugieser.But for Panerai we decided to respect the watch and its history.

Yes,the Panerai watch is heavy. It is big; it is strange. But it is different and ithas a strong personality. Most importantly, there is a history here.There is a history of value, a history of man and a history of hero. Thisis not a normal history, linked only to a watchmaker.

Here,it is a symbol; the watch is a symbol. We decided that we had to maintain theconcept.

MF:But large watches also have become very popular. Some people, however, thinkit’s a fad –is it a passing fad?

AB:We opened a new segment –the large size. It’s now difficult for collectorsto go back. The watches are easy to read; it’s easy to check the time. Clients can’t go back to smaller watches.

MF:How large can a wristwatch go? In January, your 47 mm model will be available.

AB:That’s aspecial edition commemorating our model from 1950, and is being made over 2002and 2003 in 1,950 examples.But Ithink the right size is 44.

Wealso have 42 mm –in some Radiomir—and 40 mm in Radiomir and Luminor. For theLuminor, 40 mm is the smallest we can go. Because of the crown guard andproportions, we need at least 40 mm. I think 44 mm is right.

MF:Even if you’re maintaining a tradition, you’ve developed new models. Whenyou started, initially Panerai had two lines –both the historic and thecontemporary. How do you develop a brand yet maintain the basic concept?

AB:Yes, we developed models and the brand.But frankly we were “not in business just to make business”. We wanted toachieve real status. We wanted to stay simple and genuine.Our success is linked to one idea of the watch –its history. Oursuccess is linked to one idea of the watch, to one product –its history, itsstrong personality.MF:But with that success comes growth.Will that growth dilute the brand?

AB:Here –with Panerai—we have design andhistory and content.More thanquantity I want quality. There will be even more content in the future. We wantto be serious; we have sophisticated clients.

MF:Can you elaborate about your company’s growth andgoals?

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Arial”>AB:Ourbiggest market now is Italy. The U.S. is the second biggest market. We have 50retailers in the U.S. and Canada.Butthere are 800 for Rolex.

Theday that a company doesn’t grow it will fall downYet we want to grow slowly,taking little steps. We are investing for the future; we want a brand that willbe strong 20 years from now.

Iprefer to increase contents more than numbers. And we must maintain simplicity–the essence of the brand.

MF:While your designs are simple, I’ve admired the number of new models Paneraihas produced in just a few years.

AB:Actually, we don’t have that many models.Apart from the Special Editions, wehave just 40 references: eight historic, the rest belong to thecontemporary range.Also,we have only a few dials. Brown for titanium, blue for some special dials andthen a few basic dials. I don’t want more. I prefer simplicity.

TheRadiomir line can use other content and lets us use more complicated movements.The Luminor line has several models: the “solo tempo” basic model, the GMT,the Power Reserve and the chrono. These preserve the heritage –which issomewhat contradictory, I admit, since in the 1930’s the Radiomir modelspreceded the Luminor.The Radiomirwas the first Panerai.

MF:If you would, please tell us about the company today; its facilities andpeople.

AB.Wehave 30 employees at the factory plus 15 in Milan. There’s 4 people in theU.S. A total of 80 people around the world.Our structure –it’s very simple. We are like a family.

ETAmakes most of our movement and we transform them. The GMT and Power Reserve areour developments; Valjoux transformed them and they are now exclusive to us. Weworked on this for three or four years. Also, look at the finishing.

MF:I also think many of your watches have excellent design. It’s muchharder to design something simple. Who does your design work?

AB:We have an art director, Gianpiero Bodino, who is very good. He does almosteverything, even packaging. He designed, for example, our steel bracelet. Wetalked around the table. We came up with idea that we could produce the braceletwith links like the crown protective device.

MF:Do you get involved in the design process?

AB:

MF:What, may I ask, are you wearing? Is it special?

AB:300 inhonor of the Laureus. In May 2002 we sponsored a yacht in a Regatta inMonte Carlo.

MF:Where is the industry at and where is it going?

AB:A very good question. All watchmakers now are upgrading content and product.

Butalso it’s important to the watchmaker to put something real inside. There hasto be a good balance of content and design.Then you have success. To really move up, you have to give somethingmore.

MF:Where does Panerai fit in this?

AB:The luxury unit has two primary clients. The first are trendsetters, whichalways are dangerous for a brand. The second isa solid clientele who want strong contents. They are finding brands withcontent. They want something inside. Also, as a smaller group are thecollectors, who want something very exclusive.

Theassertion of value is strong for Panerai. There is history and design andoriginality and the right mix. There is something very simple but strong.

MF:It’s clear to me that you understand where you want Panerai to be.

AB:We have to keep the watch simple and pure to its history. You have to have aclear vision and then follow what you believe.